Zhang Hongli, Senior Executive Vice President of the Industrial and Commercial Bank of China (ICBC) discusses the RMB, the euro and the dollar; the "three currencies that matter"
Vision: How can financial cooperation between Asian countries be improved?
Zhang Hongli: There are big differences in Asia – Japan is very advanced, [then there’s] Vietnam, China and Korea, so there is a big variation. Secondly, it’s very sectoral; each country has its own rules and regulations, so the overall connectivity is not there. So how [do we] improve and work on that?
I think right now there are a lot of different initiatives going on and all of them are good, but it is taking a long time. For example, I think China has discussed a free trade agreement with the GCC for a few years and we hope that the major issues can be resolved and we can sign. The minute that gets signed, business starts to pick up, trade picks up and banks can get involved.
We love this market, we have been profitable, and when people make money here you want to come back and do more
I think on the financial side, obviously currency is very important, the regulators’ connectivity is very important and in terms of rules and regulations they need to see eye-to-eye. For us, we have operations here in Abu Dhabi, Qatar, Kuwait and we will be opening up in Riyadh next year, so you need people physically here to understand and build that kind of trust.
Qatar signed an agreement with PBOC [People’s Bank of China] and Qatar Central Bank recently, which encompasses not only currency swaps, but RMB clearing and settlement, as well as the extension of the RMB Qualified Foreign Institutional Investor scheme to Qatar. We hope that the GCC would also sign such agreements with the Chinese central bank.
We see an increasing number of Chinese banks operating from Dubai. How important is the emirate for you to access the region and beyond?
If my understanding is correct I think Dubai wants to be the platform for doing business for the whole world, which is a very important positioning for them. Dubai has been very successful from where it stood 10-15 years ago. ICBC opened its office in Dubai about six years ago and both our assets and team have been growing very fast. The majority of staff are made up of local employees, and are not seconded from China.
We love this market, we have been profitable, and when people make money here you want to come back and do more. That’s why we increased our capital here and built more teams here, and that’s why I am here and we bring a lot of our clients here. We think that Dubai is a good platform not only for the GCC, but the whole Arab world and the rest of the world as well.
We’ve seen an updated Chiang Mai Initiative recently, how important is that for mitigating future risks and should more currency swap agreements be adopted?
I think the key rationale for that initiative is Asia’s banking or financial market is not good enough to handle the financial crisis so we need to work together to create a financial stability fund. It is important that we talk more to each other – and by we I mean the regulators, the governments, and the central bankers – it’s that horizontal connectivity.
The Chiang Mai Initiative is the one that is hopefully driving it and we think there is a currency element. It’s a little bit slow in my view, but I agree with some of the panellists that spoke at the forum that only three currencies matter: RMB, the euro and the dollar. Although to some extent, it depends with the euro how they sort themselves out, and whether it will be there or not. Then GCC countries and everyone involved with the Chiang Mai Initiative guys will benefit from this, because suddenly you’ll have an alternative currency to discuss (along) with the US dollar and the euro.